Recent Changes to the AAA Construction Arbitration Rules
The American Arbitration Association recently made some significant changes to its Construction Arbitration Rules. The Rule changes became effective July 1, 2015. Here are some of the highlights of the changes:
R-7. Consolidation and Joinder: Requests to consolidate related arbitrations or join other parties to an existing arbitration must be submitted before the appointment of the arbitrator, or within 90 days of the date the AAA determines all administrative filings were satisfied, whichever is later. Requests to consolidate or join parties submitted after these time frames shall not be permitted unless the party can show “good cause” for the late request. The party requesting the consolidation or joinder must provide supporting reasons for the request. This rule applies if one or more parties do not agree to the proposed consolidation or joinder. Of course, parties can always just agree to consolidate or join parties.
R-10. Mediation: In all cases where a claim or counterclaim exceeds $100,000, the parties shall mediate their dispute pursuant to the AAA’s Construction Mediation Procedures. Any party may unilaterally opt out of this rule upon notification to the AAA and the other parties to the dispute. However, remember that many construction contracts have a clause requiring the parties to participate in mediation, and you likely cannot opt out unless every party agrees to opt out.
R-23. Preliminary Management Hearing: New Rule R-23 provides that the arbitrator has the discretion (depending on the size and complexity of the matter) to schedule a preliminary hearing as soon as practicable following the arbitrator’s appointment. Both the lawyers and the parties should be invited to participate in the preliminary hearing. Section P-2 of the Rules provides a checklist of 20 items that may be addressed during the preliminary hearing.
R-24. Pre-Hearing Exchange and Production of Information. New Rule R-24 conveys to the arbitrator greater control over the exchange of information. The arbitrator will balance achieving an economic resolution with a party’s ability to present their case. The rule requires:
- the exchange of documents in a party’s possession or control on which they intend to rely;
- the parties to update their document exchanges as new documents become known to them;
- the parties to make documents available to the other parties in response to reasonable document requests, if such requests are relevant and materials to the outcome of disputed issues; and
- the parties to make documents available in the form most convenient and economical for the party in possession of such documents when exchanging or producing documents in electronic form.
R-25. Enforcement Power of the Arbitrator: This new Rule gives an arbitrator specific enforcement authority and powers to issue orders necessary to achieve a fair, efficient and economical resolution of the case, including:
- orders requiring parties to keep confidential documents that are exchanged;
- imposing search parameters for electronically stored information (if the parties are unable to agree on their own);
- allocating cost of producing documents, including electronically stored documents;
- in the case of willful non-compliance with the arbitrators’ orders, issuing sanctions such as drawing adverse inferences, excluding evidence, making special allocations of costs or an interim award of costs arising from the willful non-compliance; and
- issuing any other enforcement orders which the arbitrator is empowered under applicable law.
R-34. Dispositive Motions: This new Rule provides that upon written application, the arbitrator may permit motions that dispose of all or part of a claim, or narrow the issues in a case. Examples of this could be a Motion for Summary Judgment or Motion to Dismiss.
R-39. Emergency Measures of Protection: This new Rule allows parties to apply for emergency relief. A party seeking the emergency relief does so by requesting emergency relief from the AAA and notifying other parties to the arbitration. Under the Rules, an arbitrator is appointed within 24 hours of the AAA’s receipt of the request for emergency relief. This specific rule applies only to arbitrations conducted under arbitration clauses or agreements entered on or after July 1, 2015.
R-60. Sanctions: This new rule provides the arbitrator with authority, upon request by a party, to issue sanctions were a party fails to comply with its obligations under the Rules or with an order of the arbitrator. If sanctions are issued, the arbitrator must explain in writing the reason for the sanctions and require the submission of evidence and legal argument prior to issuing such sanctions.
The full text of Construction Arbitration Rules may be found here: https://www.adr.org/aaa/ShowProperty?nodeId=/UCM/ADRSTG_004219
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